Liberty 101: Ten things government can’t do without an income tax

3. Plan government activities based on the expected size of your income.

4. Treat you unequally under the law based on the size of your income.

5. Make it illegal for you to earn income without reporting it to the government.

6. Decide what government mandates you can “afford,” based on your income.

7. Use its revenue service’s information about your income to intimidate or punish you.

8. Pursue you for income tax if you live and work overseas.

9. Tax your income if you fail to buy a government-approved health “insurance” plan.

10. Withhold tax-exempt status from your political organization if the administration in power wants to stymie your efforts.

This last can only be done, let us realize clearly, because we have an income tax. If we didn’t tax income, government couldn’t hold the tax regime over Tea Party groups, or any other public-interest group. No public-interest group would face paying income taxes to begin with.

When the federal income tax was instituted 100 years ago, it became only a matter of time until the U.S. federal government would engage in each of the above abuses. Some citizens warned about this at the time, and, as usual, were called fools. Warnings about the enlargement of government power typically go unheeded – especially when the enlargement is sold to the voters as a measure that will apply only to the wealthiest citizens.

Americans trying to redevelop the mental habits of liberty need to understand that it is possible to pay for government without an income tax – the United States did it for 122 years, by taxing consumption – and that the absence of an income tax is a remarkably effective condition of liberty.

Without the income tax – and I include under this heading the capital gains tax, which is also percentage-based and indexed to the accretion of value – the great majority of our entire federal tax code would go away.

The income tax makes hundreds of things illegal that would not be illegal if there weren’t an income tax. One of the most important of these is something we never think about now: the fact that having a Social Security number and being known to the IRS are conditions of legally holding a job. If there were no tax on income, there would be no justification for mandating that employers and employees make the SSA and the IRS parties to our transactions. It would be not only possible but normal for employers and employees to transact our compensation privately, without anyone in the government knowing what the figures or terms were.

Think, if you haven’t done so recently, about all the things government mandates which are based on the monetary size of an income. If we had stuck to the principle that government has no business knowing our incomes – not through our reporting, and not through our employers’ – the whole slate of federal and state interventions in our compensation would either not have been established, or would operate on a much simpler and less obtrusive basis today.

Imagine just earning income and not having the government know how much you earned. Why should that be illegal? Imagine that no data summaries on your income and everyone else’s were made available by the government to public or private researchers. Why would that be a problem?

After all, it isn’t “charity” or compassion when governments institute “income transfer” schemes. It’s just government programs, which have the usual purpose of tending voting or donor constituencies. If we didn’t know what anyone else’s income was, we would be forced to open our eyes and see: we’d have to consider the actual situations of individual people who are in distress, as opposed to grouping everyone by income and trying to move what they have created and earned around among others. When anyone but the government does that, it’s called “theft.”

Yes, there would be no justification for the minimum wage, if we didn’t know what people’s incomes were. But everyone’s earnings would go a lot farther.

There would be no way to operate the Social Security program as it exists today. We would have to tax differently – tax consumption – to pay for a lot of things, including old-age indigence programs, Medicare, Medicaid, and public assistance.

Imagine if the government based its budget on what it expects to need to spend, rather than on the revenues it expects from our incomes. Imagine how the political debate would change, if there could be no endless discussion of what income percentage is the “right” one for the tax burden.

Many of our entrenched political problems – including our mind-boggling $220 trillion in unfunded out-year entitlements – are traceable to the institution of the income tax a century ago, and in fact would be literally impossible without it.

Governments are always looking for ways to hold the people in harness and confiscate things from us, but we don’t have to help our governments do that. I urge everyone to pay his taxes according to the law of the land as it is today. But at least think about how things could be different. Just think about it.

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Responses

I agree with much of what you say J.E. but am impelled to take issue with a few points. Even granting you the evils of the income tax, in my view it is a bit naive to think that other methods of legalized theft would not arise. Locks are for honest people, after all.

How about an asset tax? Forget income, just verify your net worth, consult the attached table and send in that amount… make all the income you can, we’ll just take a ‘proportional cut’ out of everything you have…every year.

Our mind-boggling $220 trillion in unfunded out-year entitlements – are NOT traceable to the institution of the income tax a century ago, though the income tax does contribute to our unfunded entitlements. Out of control spending since the 1960’s, funded by the Fed first printing and now digitizing ‘money’ out of thin air and using that ‘money’ to buy US Treasury debt, to keep the ponzi scheme going is IMO, the primary factor in the “mind-boggling $220 trillion in unfunded” debt our children and grandchildren face. Obama has indebted us by more than all the previous presidents combined.

Taxing consumption, which the United States did do for 122 years, also led to the rise of the robber barons and the massive inequities of the 19th century. Which is what fueled the creation and rise of unions.

None of this is meant to be an argument in support of the income tax, do away with it tomorrow but understand that funding the legitimate expenditures of government, while retaining a strong middle class is not an easy undertaking.

And before I hear from someone that our country had a strong middle class prior to 1913, the great majority of Americans were renters not home owners, until after WWII with passage of the GI Bill.

Retirees aside, what percentage of renters have a substantial net worth?

As in the recent Obamacare Insanity issued by the dewy eyed sweaty lipped Justice Roberts (who for the first time in court history authored both the upholding and dissenting opinions…) once he converted the penalty to a “tax” then he declared that the Feds could do what they wanted based on the power to tax.

The justification for Social Security, and the ability of the government to collect money for it is explicitly tied to the power of the Federal government emanating from the 16th Amendment power to tax income. (of course “income” needed a massage of definitions but that is trivial stuff… the words are there… the meaning.. well that’s whatever it needs to be at the time, don’t you know?)

Yes the impulse is the pure corruption of the cycle of Patronage and Client behavior; the trade of goodies and privileges for money/power via the financial contributions and votes.

The fact remains that the cycle of protection afforded against such government theft of property was broken by the 16th amendment and its direct claim on an unlimited level of our income.

“Taxing consumption, which the United States did do for 122 years, also led to the rise of the robber barons and the massive inequities of the 19th century.”
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So you’re saying that if there had been an income tax in the 19th century it would have been possible for the state to confiscate the unearned wealth of the “robber barons”? And then redistribute that wealth to whom? The “robbed peasants”? I guess the implementation of the steam engine, construction of the railroads, confiscation of the lands of the native Americans, advances in communications had nothing to do with the rise of the robber barons, it was taxing consumption that made guys like John D. Rockefeller, Andrew Carnegie, J. P. Morgan, etc. rich, not their own particular ideas and business practices. What chapter of Das Kapital are you memorizing right now?

1. Endorse Mighty’s points about why accumulating the entitlement debt depended on the existence of an income tax. There could have been no payroll taxes for Social Security and Medicare without prior establishment of the income-tax principle.

2. Append a response I made over at LibertyUnyielding to my fellow blogger Mike DeVine:

Mike, I certainly agree with you that all taxes have a core set of similar economic impacts.

Commenter Geoffrey Britain also pointed out, over at my home blog, that all forms of taxation are corruptible as well. I agree with that, and certainly do not imply otherwise.

But the evil impacts I list here depend on there being an income tax. The income tax carries with it a special set of evils: evils that involve government being able to selectively and intimately target our personal lives. The income tax and the arguments surrounding it, BY THEMSELVES, changed fundamentally how we see the relationship of government to our lifestyles and our rights against the state. It took the income tax to make multiple generations of Americans believe that we “owe” something to the government for our keep on this earth. Internalizing that idea was a profound shift in our view of man and the state.

Prior to the income tax, the American view was understood to be that of the Founders: that our rights and our abilities and economic powers PRECEDE and LIMIT the state. We tell the state what we will pay it for its services. America was unique in all history in establishing this principle for government.

The income tax undid that principle in our compact with the state, in a way a sales tax cannot accomplish. Evils ensue on any form of taxation, but a sales tax doesn’t carry with it the same seeds of the destruction of liberty that an income tax does.

GB, I would have to disagree strongly that taxing consumption had anything to do with the rise of “robber barons” — whose supposedly evil character and economic impact has been wildly oversold anyway.

The US federal government taxed tobacco, liquor, and imports, for the most part, between 1791 and 1913. This was a remarkable period in which taxes actually WENT AWAY from time to time, and other taxes had to be introduced later when new revenues were needed.

Taxes of this kind can hardly be blamed for the rise of railroad, coal, mining, logging, and banking magnates. In fact, the occasional emergence of a near-monopoly was invariably the direct result of government constraints and restraints on the competition. Governments always have to be involved, one way or another, in creating commercial monopolies.

Meanwhile, although I don’t dispute that there was grassroots support for unionization among workers, I do dispute most vigorously the proposition that unions simply arose because robber barons were mistreating workers. History just doesn’t support that. Wherever they have arisen, unions have been fostered and encouraged by professional union-starters, who come in from out of town with national or international union backing — and usually political backing as well.

In the US, as in Europe, there were always quite a few workers who did NOT want to be unionized. Violence broke out, almost invariably, because there were WORKERS who wanted to break picket lines. Business owners who wanted to keep their businesses going in spite of strikes were not wrong to either want to do that, or to provide security for workers who crossed the picket lines.

The union battle has never been against owners; it has always been against owners AND WORKERS WHO DID NOT WANT TO BE UNIONIZED. In many places, they were an absolute majority of the workers. It took violent tactics and intimidation by the unions, and government coming down on the side of unions, to unionize a lot of work places.

There is no doubt that workers were mistreated in some industries in the 19th century. Changes in state laws on work place conditions had eliminated virtually all of those problems by the time Harding was elected in 1920. Unionization was by no means “the” factor that improved working conditions. Its history is much more checkered than that. Unions have been political enterprises from the very start, and from the 1870s on, work places were unionized from without, rather than spontaneously organizing.

[…] Americans will learn from this teachable moment that taxing income – taxing it at all –creates a moral hazard of breathtaking potential. The genie is out of the bottle on this one. It’s not enough to […]

[…] Americans will learn from this teachable moment that taxing income – taxing it at all –creates a moral hazard of breathtaking potential. The genie is out of the bottle on this one. It’s not enough to […]

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